Estate Tax Planning Strategy – Minority Interest Valuation

September 27th, 2016 No comments

The Treasury Department has issued new proposed regulations that, if adopted as proposed, will effectively eliminate a common estate planning tool used to transfer wealth among family members.  That tax planning tool is the Family Limited Partnership (“FLP”) or Family Limited Liability Company.

Let’s start with the basics. A family creates a FLP which provides a centralized vehicle through which the family can not only manage a portion of its wealth, but also provide a governance structure through which the younger generation can learn the art of running a family business (if the FLP holds the family business) from the senior generation. The older generation receives both general and limited partnership interests for the assets transferred to the FLP. At some point in the future, Read more…

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Refinancing – Preparation Steps

September 20th, 2016 No comments

Whenever interest rates begin or are expected to change significantly, individuals immediately begin to think of refinancing their existing mortgage. That is a good approach to take. However, there are other considerations to ponder before going to the mortgage company and applying for a refinancing.

Mortgage lenders want to verify that you have sufficient income to service the debt. Standard industry practice is to request to see your individual income tax returns for the last 2-3 years. If you are self-employed, that means the lender also wants to see the tax returns for your business. If you are a sole proprietor, your personal tax return will suffice because the income and expenses of your business are reported on Sch. C of Form 1040, your personal income tax return. However, if your business is in the form of an S Corporation or partnership, the lender will also ask to see those returns (Form 1120S and Form 1065, respectively).

Lenders can often be difficult to work with Read more…

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NJ Proceeds to Terminate Reciprocal Tax Agreement with PA

September 13th, 2016 No comments

NJ Governor Chris Christie announced that, effective January 1, 2017, NJ is unilaterally terminating the state’s reciprocity agreement with PA. Under the current agreement, taxpayers were allowed to pay income tax in the state where they lived, not where they worked. Accordingly, PA residents who are employed in NJ will need Read more…

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Talk Is Cheap! Or . . . You Get What You Pay For

September 6th, 2016 No comments

Taxpayers often mistakenly believe that they can rely upon Internal Revenue Service (IRS) advice. After all, if the IRS is providing the advice, why would it challenge a taxpayer’s return that incorporated that advice? To the contrary, the IRS is seldom held accountable for the advice it provides to taxpayers.  Let’s look at some of the more commonly-recognized IRS tax advice resources.

Oral Advice: Taxpayers can telephone the IRS or visit an IRS office (if you can find one that is open to the public) to obtain advice. Unfortunately, oral advice from the IRS is the least reliable type of guidance. As the saying goes, you get what you pay for. Taxpayers who depend upon IRS oral advice could find themselves Read more…

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Property Acquired by Gift or Through an Estate Inheritance

August 30th, 2016 No comments

We often hear from clients who have received a gift or an inheritance and inquire as to how much this will cost them in taxes that need to be paid.

The good news is that the recipient of a gift or a bequest pays no gift or estate tax.

The “bad news” is that the taxes due, Read more…

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HOW THE AFFORDABLE CARE ACT AFFECTS EMPLOYERS WITH LESS THAN 50 EMPLOYEES

August 23rd, 2016 No comments

Under the Affordable Care Act, large employers must either offer “minimum essential coverage” that is “affordable” and that provides “minimum value” to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions”.

If you are an employer who had less than 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year (2015), you are Read more…

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“You Are Going to Be Arrested” says the Criminal

August 16th, 2016 No comments

Scammers are calling taxpayers and threatening to have a magistrate come to their home unless they pay their IRS tax debts. The IRS has reported that it is seeing a significant increase in automated phone calls from con artists pretending to work for the IRS and demanding overdue taxes.

If you do not answer your phone, these criminals leave urgent callback requests on your voice mail telling you to call back to settle your “tax bill.” The bogus calls generally purport to be the last warning before the IRS takes legal action against unsuspecting taxpayers. When a victim calls back, the con artist threatens to arrest or deport the taxpayer or revoke their driver’s license if they don’t agree to pay up.

The scammers have increasingly been asking unsuspecting taxpayers to make the payment via iTunes gift cards and similar cards. The IRS pointed out that Read more…

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THE BANK SECRECY ACT MAKES SELF-PREPARED TAX RETURNS VERY EXPENSIVE

August 9th, 2016 No comments

Every year we have new clients come to us to have their personal tax returns prepared because they are finding complying with the U.S. tax laws too complicated or preparing the returns consumes too much of their time. So to save $100 – $200 to have a return prepared by a tax professional, they were using a tax preparation firm where the employees receive minimal tax law training or self-prepared their return using TurboTax or another software product. When reviewing the prior year’s return, we often find that they have failed to comply with the U.S. tax and other laws and are subject to very onerous penalties.

For example, let’s look at the Bank Secrecy Act (BSA) that requires Read more…

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SHAREHOLDER COMPENSATION – BE PRUDENT AND TAKE THE NECESSARY STEPS TO DOCUMENT REASONABLENESS

August 2nd, 2016 No comments

We periodically remind our S Corp. clients of the importance of paying themselves a reasonable salary. We offer to perform a reasonable compensation analysis for them for a nominal cost, especially in light of the dollars at risk. There are those who respond that they have themselves determined that their salary is reasonable. When we hear these types of responses, we often think of the adage “What do you call an attorney who represents himself in court? A fool.” The same can often be said for these business owners who don’t understand how the IRS determines reasonable compensation.

For those of you who may not be familiar with the issue, the IRS discovered years ago Read more…

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ESTATE (NON) PLANNING – IT SADDENS US TO HEAR

July 26th, 2016 No comments

How sad it is to hear from a client that a loved one passed away and there was no estate plan in place. Grieving over the loss of a loved one is difficult enough without having to face the challenges of not having an estate plan in place.

Too many tomorrows create too many problems today. Implementing an estate plan should be a top priority and not postponed until a later date. This is one of those real life examples where it would have only taken a few minutes to contact an estate attorney to begin the process of creating an estate plan. Instead, the estate planning attorney is now being contacted to help clean up a potential mess where needed funds could be tied up in the courts for months. It reminds us of the old Fram oil filter commercial – “You can pay me now, or pay me later.” (It is much cheaper to change an oil filter for a few dollars than to rebuild a car engine for thousands of dollars.) By all means, pay the estate planning attorney today!

If you do not have an estate plan, your plan is several years old, if you have relocated to a different state, your medical health has significantly changed, or family members have passed away or new ones have entered the family, it may be an opportune time to call that estate planning attorney and request a consultation.

What is an estate plan? We will let the estate planning attorney address that with you. However, you may wish to become familiar with such terms as a will, a revocable and irrevocable trust, a living will or advance health directive, and a durable power of attorney. In addition, it is most important to review the beneficiaries listed on all retirement accounts and investment accounts. Despite what your expressed wishes are in your will as to your beneficiaries, some types of accounts are governed by the named beneficiaries in these types of accounts. So although your will says that your only child should receive your full inheritance, if your sole retirement account designates another beneficiary (such as a divorced ex-spouse), your daughter may not see a dime of your inheritance.

If you want to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.

Copyright © 2016 Keystone Financial Solutions, P.C.  All rights reserved.  BE SURE TO READ THE DISCLAIMER PAGE: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information.
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